Interactives: Inside Twitter's IPO

Ad buyers say that the short-message service will need significantly more users, and a bigger sales force, to win more spending from their mass-market clients.

"Scale still matters," says
Adam Shlachter,
senior vice president of media at DigitasLBi, a digital-ad firm owned by
Publicis Groupe
SA
. "How consumers embrace [Twitter] and tap into it or tune in or out is going to be critical."

ENLARGE

Since the first 140-character message was dispatched in March 2006, Twitter has exploded into a game-changing communication tool where news is made and broken by public figures and ordinary citizens.

Here's the problem: It seems there are more people talking about Twitter than using it.

Twitter boasts 218 million monthly active users, according to its Thursday filing with the Securities and Exchange Commission. That's less than one-fifth as many as rival
Facebook
Inc.
's 1.15 billion.

Some 22% of U.S. Internet users are on Twitter, according to
Forrester Research
Inc.
By comparison, 72% check Facebook at least once a month.

It is a troublesome issue for Twitter, which relies heavily on advertisers to make money, as it looks to raise $1 billion in a public offering. Advertising accounted for about 85% of Twitter's $317 million in revenue in 2012, according to the filing. Facebook reported $4.3 billion in advertising revenue last year.

Twitter's anticipated IPO made the list of top tech stories. Scott Austin rounds up the week in tech. Photo: Getty Images.

What is more, the rate of user growth is slowing. In the second quarter, Twitter's growth in monthly active users slowed to 7% from three months earlier, compared with 10% to 11% growth in the prior three quarters.

Progressive
Corp.
buys ads featuring tweets from "Flo," the zany always-cheerful star of its television ads, who has more than 20,000 Twitter followers. But the Mayfield Heights, Ohio, insurer favors Facebook for social-media advertising.

"The 200 million-plus Twitter nation is a powerful and influential force that you have to pay attention to," says
Jeff Charney,
Progressive's chief marketing officer. He says the insurer will consider spending more as Twitter grows. But Facebook has "more heft," he says. "You just can't ignore Facebook."

Photos: Inside Twitter's Office Culture

Twitter's bird logo and bird-related décor are found throughout the San Francisco headquarters. Alison Yin for The Wall Street Journal

Twitter itself recognized the risk if it fails to increase its user base and engagement level in its Thursday filing, saying it "could result in the loss of advertisers and revenue." A Twitter spokesman declined to comment.

Brian Wieser,
an analyst at the Pivotal Research Group, says advertisers today are spending far more on Facebook than Twitter. But he is optimistic about Twitter's future, because he thinks the company is "clued in" to advertisers' concerns.

Some advertisers say Twitter makes up in quality what it lacks in quantity. The many celebrities and media pundits who use the service can be very influential, they say.

"It is an important audience and I want our brand to be part of the conversation that is happening there," says
Lisa Cochrane,
senior vice president of marketing at
Allstate
Corp.

Ms. Cochrane says she isn't worried about Twitter's slowing user growth. "People are learning how to use it and it will find its place," she says.

ENLARGE

In the second quarter, Twitter's growth in monthly active users slowed to 7% from three months earlier, compared with 10% to 11% growth in the prior three quarters.
Alison Yin for the Wall Street J

Part of Twitter's problem, analysts say, is that the service is hard to use. It can be difficult to identify relevant information amid the torrent of tweets. New users must devote time and energy to acquire "followers" and curate a list of accounts they want to "follow."

The "focus needs to be on making the service useful and relevant to the masses," said Vik Kathuria, managing partner at MediaCom, a media-buying firm owned by
WPP
PLC. "They need to find ways to connect with the masses to increase engagement so it's not a small minority who remain the power users," he added.

Another weakness, advertisers say, is that Twitter has yet to become a daily habit for many people. Usage tends to spike during big events, such as the Super Bowl, or natural disasters.

Advertisers want to know it has a "consistent audience to tap into and it's not an audience that is just churning in and out," says Mr. Shlachter of DigitasLBi.

The would-be emperor is having a wardrobe malfunction - this IPO is exposing its dirty little secrets for the world to see. In a narcissistic social media industry, Twitter's pandering to the proud knows no bounds. However, the egoists are about to have their bubbles burst when it's revealed how many of their adoring fans are actually robotwit fakes. Twitter attracts wanna-be celebs because they think a lot of people care what they say. When 9 out of 10 turn out to be robotwits, and the celebs realize they've been duped, the game is gonna be up for Twitter.

I just spent the weekend at the ANA Masters of Marketing conference. One strategic theme shared by the CMOs of the biggest marketing companies is the importance of marketing to Millennials. One tactic they all mention in the context of this strategy is Twitter. The members of the digerati who are saying that Twitter is not big enough seem to be out of touch with the CMOs they work for. Nothing new there.

Most of projects i work with has the tweeter account, but it doesn`t mean they have ever visit the Twitter site. they just tweet-cast the messages automatically, and do not really care who will receive them.

As someone mentioned earlier in this thread, I believe Twitter should merge with Facebook because they are two totally different products. Facebook is more of a virtual home where you can go hangout with your family and friends. You may also play games, watch videos and the like. I believe in the future Facebook will create tangible products like coupons from your favorite product manufacturers.

Facebook's platform is designed to host any form of innovation. By contrast, Twitter can only Tweet.

Lately I have notice Twitter has become annoying, as I user I know what I want but they keep sending me emails - 'Did you check this tweet? did you check that tweet?' etc. I had no choice but to unsubscribe some notification. I my view tweets from celebrity, politicians, sports personality etc make sense I would love to subscribe rest of the people are like a cork in the ocean or a bird that tweet in an empty forest!

Also I am tried of these # or @ _ or chars I don't know what to make or that cryptic message.

Twitter needs to measure total time users spend on it not just the number of users.

I might check facebook for 1-2 minutes every week. I check twitter fornews/etc for at least 10-20 minutes/day.

I suspect everyone has a facebook account just like everyone used to have a phone book entry. I'm not sure if you counted the total time spent on both sites if the totals would still come out so heavily in favor of facebook.

Well you know a company will implode when the premise is everyone talks, and no one listens!! ...How about this for a novel concept, folks should only be allowed to frequently talk (i.e. tweet) if they earn the privilege to talk. Meaning, the more a person's tweets are Liked, Re-tweeted, Responded to, Referenced, #hast-taged, or Disliked (vs distasteful), the more "Tweeting" privilege and notoriety a person is granted.

Further, folks aren't given credit for re-tweeting, they're given credit for ORIGINAL content. Twitter has created a new crop of Spam "all-stars", that figuratively park outside people's mouths, and re-bark everything they said.

It sort of reminds me of that FedEx commercial, when one person comes up with a novel idea, but another person repeats it a bit more eloquently, and the boss lights up as if he is hearing it for the first time. It's a nutty concept that's worth bupkiss! ... that said, did anyone see my tweets today? It's all original stuff!

When I want to mini blog on politics or sports, I use twitter. When I want to promote a post on my blog, I use twitter and/or Facebook. I am a fairly heavy user of twitter (6,900 tweets) and Facebook for mini-blogging about politics, but not about stocks or products.

When I want a product review, I go to Amazon.com. Great reviews, lots of opinions. The writing is as good, in some cases, as you'll see in computer and car mags.

When I want to talk to my real friends, some high school buddies and Colorado Republicans, I use FaceBook, my blog and email, if not a lunch date, etc..

When I want to get into discussions about products, politics, sports, health insurance, travel, hobbies, etc., there is nothing like the good old fashioned (1998- ) message board or forum.

I just searched twitter for printers because we all buy them at one time or another. #printers is unhelpful. Then I tried a brand, and all I got was that company's ads. No conversations, opinions, suggestions, rating. I won't go back to twitter for that kind of information. Facebook pages don't seem to be any more useful.

So as a small business, I'd probably continue to use Google's Adsense, Craig'slist.org, Amazon, ebay and maybe LinkeIn if I was selling services.

For car, health and property & casualty insurance, none of the above make much sense to me as a marketer unless I' was trying to drive some traffic to my web site. I'd use TV, Radio and direct mail. Same goes for consumer electronics, foods, drugs, investments, etc.

What social marketers seem to be forgetting is that most people who write well enough to be comfortable on twitter, Facebook, etc., are smart enough to shop, ask questions, demand answers and use Amazon, eBay, Craigslist and the web sites of retailers and producers of goods and services. We're not going to be swayed or even attracted by banner ads, annoying display ads or marketers' trolls.

Marketers, of course, are under pressure from their clients to use social media, and they're pressuring their clients to use social media or be left out. The herd has been moving into social media for more than a decade (CompuServe, message boards, news and topic sites and then FaceBook and twitter.) To me, it seems they'd better be sure that they're not the lemmings who are being led to the last cliff.

But, then, I'm not in marketing today, and I'm old fashioned as a marketer and as a consumer. Retired. The kids are having their fun making money with twitter and Facebook, and they probably are helping some clients. But I keep thinking that a lot of clueless CEOs are being had.

There really isn't a comparison between Facebook and Twitter. Twitter simply doesn't offer anything close to what Facebook offers. It's going to be very difficult to create an advertising platform on par with Facebook's, which offers rich media, online video, :15 TV style ads (soon!) and the Like button. Facebook is an extremely innovative company that is constantly thinking of how to improve their customers' experience. Facebook has already taken market share away from Google in the mobile advertising space and it's increasing that market share by leaps and bounds every quarter. Facebook has so many users that brands and advertisers can easily target their specific customer.

Crux of the matter from an advertising standpoint: "Here's the problem: It seems there are more people talking about Twitter than using it." Time spent and other measures are worthwhile - and prove the point.

i thinks the stats are wrong because alot of people are using adblock and i am one of the users of adblock because i think ads are such a pain and slowdown my website loading and so far i blocked in total 26836 ads that is why i needed a way to avoid them and hope they invent a new way to advertise this junk.

My experience is that Twitter users are heavily weighted towards techy types and news junkies. They've abandoned the Facebook experience for any number of personal reasons but only a few select friends came with them (or were found there). Most of their family is probably still on Facebook only as well as some friends.

And honestly, Twitter may not come out ahead by counting total time. My husband, sister, and I all have Twitter accounts. I might check mine once a month. My husband and sister never log in. All 3 of us do Facebook as well as most of the rest of my family/friends, most of whom don't do Twitter. I suspect Twitter gets more than it's fair share of hype because journalists and the media love it.

Twitter might be able to attract niche advertising, but unless something changes, I can't see it being able to sell on volume. There's a huge learning curve and a unique experience once you do learn it. Ultimately, I don't think it's going to attract the masses if it hasn't yet.

I concur... Twitter will be one massive wealth transfer. It's best they merge with FB, and use an intra and outer network info/news sharing feature... Giving where privacy rules are going, FB will probably eventually allow users to have a personal and public profile (especially to promote tweeting).

My point - instead of idiot money managers wasting investors $1bln on Twitter's IPO, invest the $1bln in FB, and benefit from FB's launch of a robust platform with the same functionality as Twitter. Not sure if that was 140 characters, but that relic concept will be gone with FB also, which hopefully will give me 200 characters, or like the movie, "There's Something About Mary", is that NOT possible!!

Even if a consumer sees an ad, it doesn't mean that they will take any action. Twitter simply isn't designed for brands and advertisers. I'm not sure how they're going to create an effective advertising platform, much less get brands to purchase ad space.

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